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Capital Employed
A fresh batch of Q1 fund letters just added including excellent letters from...
@DeepSailCapital @wmthomson22 @1MainCapital
https://t.co/lJZP1lUdTx https://t.co/gZ1qI8N2uk
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A fresh batch of Q1 fund letters just added including excellent letters from...
@DeepSailCapital @wmthomson22 @1MainCapital
https://t.co/lJZP1lUdTx https://t.co/gZ1qI8N2uk
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Wall St Engine
Jefferies Downgrades $AAPL to Underperform from Hold, Raises PT to $170.62 from $167.88; 'Mar Q In Line but Tariff Impact Likely to Worsen'
Analyst comments: "Apple reported 5%/5%/8% rev/NP/EPS growth for 2QFY25, in line with cons and above JEFe. Mgt indicated limited pull in for the Mar Q, but guided only LSD-MSD rev growth and US$900m tariff impact in the next Q. We est that implies 7m iPhone P/PM shipments from China, good enough for US demand in the Jun Q. Product GM is already under pressure, down 0.7ppt YoY. We believe tariff impact will expand over time to create more earnings downside. D/G to Underperform."
Analyst: Edison Lee
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Jefferies Downgrades $AAPL to Underperform from Hold, Raises PT to $170.62 from $167.88; 'Mar Q In Line but Tariff Impact Likely to Worsen'
Analyst comments: "Apple reported 5%/5%/8% rev/NP/EPS growth for 2QFY25, in line with cons and above JEFe. Mgt indicated limited pull in for the Mar Q, but guided only LSD-MSD rev growth and US$900m tariff impact in the next Q. We est that implies 7m iPhone P/PM shipments from China, good enough for US demand in the Jun Q. Product GM is already under pressure, down 0.7ppt YoY. We believe tariff impact will expand over time to create more earnings downside. D/G to Underperform."
Analyst: Edison Lee
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Wall St Engine
DA Davidson Cites “Strong Subscriber Growth & Resilient Trends” as It Maintains Buy on $DUOL, Raises PT to $470 from $410
Analyst comments: "Duolingo reported Q1’25 results that came in 3% ahead of our estimates on revenue and 11% ahead on adjusted EBITDA. First-quarter performance was driven by continued subscriber growth and strong uptake of higher-priced plans like Duolingo Max and the Family plan. Duolingo’s Q2 guidance of 40–45% year-over-year daily active user (DAU) growth came in ahead of consensus and our estimate at the midpoint, supported by ongoing product optimization and strength in resurrected users—42.5% DAU growth expected at the midpoint, even while lapping 59% year-over-year growth in Q2’24.
Despite uneasiness in the macro environment and reports of broader consumer softness, Duolingo indicated it has not seen any softness in the quarter, and that usage trends remain strong. During past periods of macro weakness, the company noted it tends to be well positioned due to: (1) its global presence, (2) its freemium model, which at minimum sustains user engagement, and (3) its low pricing relative to the high value provided. In prior instances of concern around consumer spending, Duolingo has not typically seen a corresponding drop-off in its performance. We reiterate our Buy rating."
Analyst: Wyatt Swanson
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DA Davidson Cites “Strong Subscriber Growth & Resilient Trends” as It Maintains Buy on $DUOL, Raises PT to $470 from $410
Analyst comments: "Duolingo reported Q1’25 results that came in 3% ahead of our estimates on revenue and 11% ahead on adjusted EBITDA. First-quarter performance was driven by continued subscriber growth and strong uptake of higher-priced plans like Duolingo Max and the Family plan. Duolingo’s Q2 guidance of 40–45% year-over-year daily active user (DAU) growth came in ahead of consensus and our estimate at the midpoint, supported by ongoing product optimization and strength in resurrected users—42.5% DAU growth expected at the midpoint, even while lapping 59% year-over-year growth in Q2’24.
Despite uneasiness in the macro environment and reports of broader consumer softness, Duolingo indicated it has not seen any softness in the quarter, and that usage trends remain strong. During past periods of macro weakness, the company noted it tends to be well positioned due to: (1) its global presence, (2) its freemium model, which at minimum sustains user engagement, and (3) its low pricing relative to the high value provided. In prior instances of concern around consumer spending, Duolingo has not typically seen a corresponding drop-off in its performance. We reiterate our Buy rating."
Analyst: Wyatt Swanson
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Wall St Engine
TRUMP: NO INFLATION, THE FED SHOULD LOWER ITS RATE!!!
"Gasoline just broke $1.98 a Gallon, lowest in years, groceries (and eggs!) down, energy down, mortgage rates down, employment strong, and much more good news, as Billions of Dollars pour in from Tariffs." https://t.co/FSqlu8Gir7
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TRUMP: NO INFLATION, THE FED SHOULD LOWER ITS RATE!!!
"Gasoline just broke $1.98 a Gallon, lowest in years, groceries (and eggs!) down, energy down, mortgage rates down, employment strong, and much more good news, as Billions of Dollars pour in from Tariffs." https://t.co/FSqlu8Gir7
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Wall St Engine
LUCID SOLD JUST ONE CAR IN NETHERLANDS IN APRIL
After posting a small sales bump in March, $LCID's Dutch deliveries dropped again last month — just one vehicle sold. That brings total 2025 sales in the country to 16 so far. For comparison, Tesla sold 382 units and BYDmoved 268. https://t.co/dsbn13jhGl
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LUCID SOLD JUST ONE CAR IN NETHERLANDS IN APRIL
After posting a small sales bump in March, $LCID's Dutch deliveries dropped again last month — just one vehicle sold. That brings total 2025 sales in the country to 16 so far. For comparison, Tesla sold 382 units and BYDmoved 268. https://t.co/dsbn13jhGl
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Wall St Engine
NVIDIA $NVDA IS AGAIN WORKING ON CHINA-TAILORED CHIPS AFTER U.S. EXPORT BAN - THE INFORMATION https://t.co/5zy3PoTLmB
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NVIDIA $NVDA IS AGAIN WORKING ON CHINA-TAILORED CHIPS AFTER U.S. EXPORT BAN - THE INFORMATION https://t.co/5zy3PoTLmB
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Offshore
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Dimitry Nakhla | Babylon Capital®
RT @DimitryNakhla: A quality valuation analysis on $META 🧘🏽♂️
•NTM P/E Ratio: 22.41x
•5-Year Mean: 25.26x
•NTM FCF Yield: 3.04%
•5-Year Mean: 3.39%
As you can see, $META appears to be trading near fair value
Going forward, investors can expect to receive ~12% MORE in earnings per share & ~10% LESS in FCF per share🧠***
Before we get into valuation, let’s take a look at why $META is a quality business
BALANCE SHEET✅
•Cash & Equivalents: $77.82B
•Long-Term Debt: $28.83B
$META has an excellent balance sheet, an AA- S&P Credit Rating & 127x FFO Interest Coverage Ratio
RETURN ON CAPITAL✅
•2020: 23.5%
•2021: 33.7%
•2022: 22.0%
•2023: 25.7%
•2024: 29.4%
RETURN ON EQUITY✅
•2020: 25.4%
•2021: 31.1%
•2022: 18.5%
•2023: 28.0%
•2024: 37.1%
$META has great return metrics, highlighting the financial efficiency of the business
REVENUES✅
•2019: $70.70B
•2024: $164.50B
•CAGR: 18.39%
FREE CASH FLOW✅
•2019: $21.21B
•2024: $54.07B
•CAGR: 20.58%
NORMALIZED EPS✅
•2019: $8.56
•2024: $23.86
•CAGR: 22.75%
SHARE BUYBACKS✅
•2019 Shares Outstanding: 2.88B
•LTM Shares Outstanding: 2.61B
By reducing its shares outstanding ~9%, $META increased its EPS by ~10% (assuming 0 growth)
MARGINS✅
•LTM Gross Margins: 81.7%
•LTM Operating Margins: 41.5%
•LTM Net Income Margins: 37.9%
***NOW TO VALUATION 🧠
As stated above, investors can expect to receive ~12% MORE in EPS & ~10% LESS in FCF per share
Using Benjamin Graham’s 2G rule of thumb, $META has to grow earnings at an 11.22% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2025 - 2027 EPS growth over the next few years to be slightly greater than the (11.22%) required growth rate:
2025E: $24.75 (3.7% YoY) *FY Dec
2026E: $28.36 (14.6% YoY)
2027E: $32.96 (16.2% YoY)
$META has a decent track record of meeting analyst estimates ~2 years out, so let’s assume $META ends 2027 with $32.96 in EPS & see its CAGR potential assuming different multiples
24x P/E: $791.04💵 … ~15.7% CAGR
23x P/E: $758.08💵 … ~13.9% CAGR
22x P/E: $725.12💵 … ~12.0% CAGR
21x P/E: $692.16💵 … ~10.1% CAGR
20x P/E: $659.20💵 … ~8.1% CAGR
As you can see, $META appears to have double-digit CAGR potential if we assume >22x earnings, a multiple below its 5-year average (25.26x) and a multiple that’s justified given its growth rate, balance sheet, visionary CEO & investments in AI & LLMs
As I’ve mentioned before: “… the increased investment in future growth and necessary Al development, which has the potential to lead to better growth prospects, should be viewed with a bullish tone rather than a bearish one” — (which can lead to a sustainable re-rating over the next few years)
Today at $540💵 $META appears to be slightly undervalued, those buying today have a small margin of safety and will not need to rely on margin expansion
I consider $META a great buy ~$500💵, offering ~11% CAGR assuming a conservative 20x 2027 EPS est
#stocks #investing
___
𝐃𝐈𝐒𝐂𝐋𝐎𝐒𝐔𝐑𝐄‼️: 𝐓𝐡𝐢𝐬 𝐢𝐬 𝐍𝐎𝐓 𝐈𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐀𝐝𝐯𝐢𝐜𝐞. 𝐁𝐚𝐛𝐲𝐥𝐨𝐧 𝐂𝐚𝐩𝐢𝐭𝐚𝐥® 𝐚𝐧𝐝 𝐢𝐭𝐬 𝐫𝐞𝐩𝐫𝐞𝐬𝐞𝐧𝐭𝐚𝐭𝐢𝐯𝐞𝐬 𝐦𝐚𝐲 𝐡𝐚𝐯𝐞 𝐩𝐨𝐬𝐢𝐭𝐢𝐨𝐧𝐬 𝐢𝐧 𝐭𝐡𝐞 𝐬𝐞𝐜𝐮𝐫𝐢𝐭𝐢𝐞𝐬 𝐝𝐢𝐬𝐜𝐮𝐬𝐬𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭.
𝐓𝐡𝐞 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐜𝐨𝐧𝐭𝐚𝐢𝐧𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭 𝐢𝐬 𝐢𝐧𝐭𝐞𝐧𝐝𝐞𝐝 𝐟𝐨𝐫 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧𝐚𝐥 𝐩𝐮𝐫𝐩𝐨𝐬𝐞𝐬 𝐨𝐧𝐥𝐲 𝐚𝐧𝐝 𝐬𝐡𝐨𝐮𝐥𝐝 𝐧𝐨𝐭 𝐛𝐞 𝐜𝐨𝐧𝐬𝐭𝐫𝐮𝐞𝐝 𝐚𝐬 𝐢𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐚𝐝𝐯𝐢𝐜𝐞 𝐭𝐨 𝐦𝐞𝐞𝐭 𝐭𝐡𝐞 𝐬𝐩𝐞𝐜𝐢𝐟𝐢𝐜 𝐧𝐞𝐞𝐝𝐬 𝐨𝐟 𝐚𝐧𝐲 𝐢𝐧𝐝𝐢𝐯𝐢𝐝𝐮𝐚𝐥 𝐨𝐫 𝐬𝐢𝐭𝐮𝐚𝐭𝐢𝐨𝐧. 𝐏𝐚𝐬𝐭 𝐩𝐞𝐫𝐟𝐨𝐫𝐦𝐚𝐧𝐜𝐞 𝐢𝐬 𝐧𝐨 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞 𝐨𝐟 𝐟𝐮𝐭𝐮𝐫𝐞 𝐫𝐞𝐬𝐮𝐥𝐭𝐬.
𝐈𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐜𝐨𝐧𝐭𝐚𝐢𝐧𝐞𝐝 𝐢[...]
RT @DimitryNakhla: A quality valuation analysis on $META 🧘🏽♂️
•NTM P/E Ratio: 22.41x
•5-Year Mean: 25.26x
•NTM FCF Yield: 3.04%
•5-Year Mean: 3.39%
As you can see, $META appears to be trading near fair value
Going forward, investors can expect to receive ~12% MORE in earnings per share & ~10% LESS in FCF per share🧠***
Before we get into valuation, let’s take a look at why $META is a quality business
BALANCE SHEET✅
•Cash & Equivalents: $77.82B
•Long-Term Debt: $28.83B
$META has an excellent balance sheet, an AA- S&P Credit Rating & 127x FFO Interest Coverage Ratio
RETURN ON CAPITAL✅
•2020: 23.5%
•2021: 33.7%
•2022: 22.0%
•2023: 25.7%
•2024: 29.4%
RETURN ON EQUITY✅
•2020: 25.4%
•2021: 31.1%
•2022: 18.5%
•2023: 28.0%
•2024: 37.1%
$META has great return metrics, highlighting the financial efficiency of the business
REVENUES✅
•2019: $70.70B
•2024: $164.50B
•CAGR: 18.39%
FREE CASH FLOW✅
•2019: $21.21B
•2024: $54.07B
•CAGR: 20.58%
NORMALIZED EPS✅
•2019: $8.56
•2024: $23.86
•CAGR: 22.75%
SHARE BUYBACKS✅
•2019 Shares Outstanding: 2.88B
•LTM Shares Outstanding: 2.61B
By reducing its shares outstanding ~9%, $META increased its EPS by ~10% (assuming 0 growth)
MARGINS✅
•LTM Gross Margins: 81.7%
•LTM Operating Margins: 41.5%
•LTM Net Income Margins: 37.9%
***NOW TO VALUATION 🧠
As stated above, investors can expect to receive ~12% MORE in EPS & ~10% LESS in FCF per share
Using Benjamin Graham’s 2G rule of thumb, $META has to grow earnings at an 11.22% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2025 - 2027 EPS growth over the next few years to be slightly greater than the (11.22%) required growth rate:
2025E: $24.75 (3.7% YoY) *FY Dec
2026E: $28.36 (14.6% YoY)
2027E: $32.96 (16.2% YoY)
$META has a decent track record of meeting analyst estimates ~2 years out, so let’s assume $META ends 2027 with $32.96 in EPS & see its CAGR potential assuming different multiples
24x P/E: $791.04💵 … ~15.7% CAGR
23x P/E: $758.08💵 … ~13.9% CAGR
22x P/E: $725.12💵 … ~12.0% CAGR
21x P/E: $692.16💵 … ~10.1% CAGR
20x P/E: $659.20💵 … ~8.1% CAGR
As you can see, $META appears to have double-digit CAGR potential if we assume >22x earnings, a multiple below its 5-year average (25.26x) and a multiple that’s justified given its growth rate, balance sheet, visionary CEO & investments in AI & LLMs
As I’ve mentioned before: “… the increased investment in future growth and necessary Al development, which has the potential to lead to better growth prospects, should be viewed with a bullish tone rather than a bearish one” — (which can lead to a sustainable re-rating over the next few years)
Today at $540💵 $META appears to be slightly undervalued, those buying today have a small margin of safety and will not need to rely on margin expansion
I consider $META a great buy ~$500💵, offering ~11% CAGR assuming a conservative 20x 2027 EPS est
#stocks #investing
___
𝐃𝐈𝐒𝐂𝐋𝐎𝐒𝐔𝐑𝐄‼️: 𝐓𝐡𝐢𝐬 𝐢𝐬 𝐍𝐎𝐓 𝐈𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐀𝐝𝐯𝐢𝐜𝐞. 𝐁𝐚𝐛𝐲𝐥𝐨𝐧 𝐂𝐚𝐩𝐢𝐭𝐚𝐥® 𝐚𝐧𝐝 𝐢𝐭𝐬 𝐫𝐞𝐩𝐫𝐞𝐬𝐞𝐧𝐭𝐚𝐭𝐢𝐯𝐞𝐬 𝐦𝐚𝐲 𝐡𝐚𝐯𝐞 𝐩𝐨𝐬𝐢𝐭𝐢𝐨𝐧𝐬 𝐢𝐧 𝐭𝐡𝐞 𝐬𝐞𝐜𝐮𝐫𝐢𝐭𝐢𝐞𝐬 𝐝𝐢𝐬𝐜𝐮𝐬𝐬𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭.
𝐓𝐡𝐞 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐜𝐨𝐧𝐭𝐚𝐢𝐧𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭 𝐢𝐬 𝐢𝐧𝐭𝐞𝐧𝐝𝐞𝐝 𝐟𝐨𝐫 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧𝐚𝐥 𝐩𝐮𝐫𝐩𝐨𝐬𝐞𝐬 𝐨𝐧𝐥𝐲 𝐚𝐧𝐝 𝐬𝐡𝐨𝐮𝐥𝐝 𝐧𝐨𝐭 𝐛𝐞 𝐜𝐨𝐧𝐬𝐭𝐫𝐮𝐞𝐝 𝐚𝐬 𝐢𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐚𝐝𝐯𝐢𝐜𝐞 𝐭𝐨 𝐦𝐞𝐞𝐭 𝐭𝐡𝐞 𝐬𝐩𝐞𝐜𝐢𝐟𝐢𝐜 𝐧𝐞𝐞𝐝𝐬 𝐨𝐟 𝐚𝐧𝐲 𝐢𝐧𝐝𝐢𝐯𝐢𝐝𝐮𝐚𝐥 𝐨𝐫 𝐬𝐢𝐭𝐮𝐚𝐭𝐢𝐨𝐧. 𝐏𝐚𝐬𝐭 𝐩𝐞𝐫𝐟𝐨𝐫𝐦𝐚𝐧𝐜𝐞 𝐢𝐬 𝐧𝐨 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞 𝐨𝐟 𝐟𝐮𝐭𝐮𝐫𝐞 𝐫𝐞𝐬𝐮𝐥𝐭𝐬.
𝐈𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐜𝐨𝐧𝐭𝐚𝐢𝐧𝐞𝐝 𝐢[...]